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US stocks losing some steam after 41 record high closes of the year. But our next guest saying that history suggests that the rally is going to continue post Fed rate cut. Joining us now, I'm going to bring in Ryan Dietrich. He was just slated from our very own Jared Blickry. Ryan Dietrich is Carson Group's chief of market strategist. Ryan, it's great to talk to you. So you are very optimistic about where stocks are going to head from here. Why are you at all concerned that maybe the 50 basis point cut is a signal that things could be weaker than we thought on the on the economic front?

Yeah, good morning everyone. And I'm glad to be back talking about stocks and new highs. You know, we've come I've come on all year saying we're pretty optimistic that this is a bull market. We're still in that camp. Now, the big question of course, they just did 50. We're of the opinion they probably should have done 25 seven weeks ago, so maybe they just brought the eraser out. And the big argument is is the economy slowing because yes, they cut 50 before to in 2001 and 2007 and 100 year pandemic, not very good times. Um but we still think again, what I've said all year, inflation is last year's problem, right? So they they we don't need interest rates over 5% right now. And you look at the economy, I could talk all day about this, keep it fairly simple. Is the labor market slowing? Yes. But look at initial claims, one of the best indicators we have for real time, you know, what's going on with the labor market. Hit a four-month low just last week. One more thing, earnings. I mean, earnings do matter. Forward earnings and the S&P 500 is hit 267. What in the world does that mean? It was 225 this time to start at 23. So are things perfect? No. Is the economy slowing down? Yes. Are we going to into recession? No, we don't think so. And we think these rate cuts are going to continue to kind of juice this bull market and honestly help this economy going forward.

To what extent? I mean, what what type of percentage have we seen in the past to suggest that we could see even more upside from here as I'm looking at some of the stats that Jared brought up and that you were posting about as well this week, 41 all-time highs for the S&P 500 in 2024.

Yeah, 41's an awfully lot. Extrapolates out to up over 50, which would be one of the most ever. But you know, we we took a look at kind of, can the Fed cut interest rates near all-time highs because people are wondering that. Yes is the answer. I went back to the 1980, found 20 times they cut interest rates within 2% of an all-time high. One year later, higher, 20 times, Brad. And the average return about 13.9%, so let's just round it to 14. Um you know, are we going to have two back-to-back 20% years? It's looking like it, right? Will we have three? Probably not. Um but at the same time, you know, double digit returns this time in the next year if the economy hangs in there, we think it's possible. And one more comment on this, that's large caps, right? I've come on here all year and said we like small caps, we like mid caps. Mid caps have been our largest overweight all year. And historically, when do those really start to outperform? It's once the Fed actually starts cutting, right? We saw that big rally last year or late last year, we thought the Fed would cut sooner, then we had the jump in inflation and economic data the first quarter of this year, which pushed things back. But now that the Fed's actually cutting, we think smaller mid caps will probably outperform large caps over the next year.

Ryan, what does that upside look like, do you think?

Well, like I said, upside to with the S&P 500, this time from right now, let's say come back in 12 12 months, right? A year from now, we wouldn't be surprised at all. We had 12 to 15% returns on the S&P 500. But small caps and mid caps, honestly, could probably be more than 20% or so, low 20% or so, is what we think is uh is possible. And that's the thing about this market, right? I mean everybody's like, oh, you know, large caps here, small caps, everybody's arguing about everything. I mean sometimes a diversified portfolio, sticking with kind of, you know, rebalancing every every three, six months or so, that's the best thing for a lot of investors out there listening. I mean don't always chase a shiny object. We've been neutral, last comment, we've been neutral technology most of this year. A couple, you know, three, four months ago, people thought we were crazy to say that. There are some really stretched valuations and technology. Doesn't mean we don't like it, again we're neutral, but there's some other areas like financials, like industrials, small caps, mid caps that are pretty cheap historical historically and those are areas we're overweight.

Ryan, are you just looking past the election and any uncertainty that that could cause given the fact that you are so optimistic about the returns that we could see over the next 12 months?

Can we just look past the election? Is that is that okay? Um yes, you know, well, let's put it this way. Um the second half of September, like Jared just talked about a little bit, is usually when the volatility happens. Well, not so far this year, but it is October coming up, the worst month in an election year, the most volatile month historically. We're we're thinking it makes sense. We're going to have probably that October election surprise, whatever it might be, some October volatility. Just remember though, once you get through the election, markets can take bad news, markets can take good news. They just don't like uncertainty. We're going to have a lot of that. And the good news for investors out there, November historically is very strong in an election year and December is too. So if we get some rockiness in October, that's okay. One more thing on this, I mean, S&P is up nine of the last 10 months, all right? The only month we've been down is April, which usually is a pretty good month, so go figure there. So we might be up at 10 out of 11 months here if we're higher in September. So this has been a great move. Markets don't always go up. Maybe we're due for that October volatility, but again, bigger picture, we would be actively buying any weakness for into your rally and even into next year.

Ryan Dietrich of Carson Group. Ryan, always a pleasure to catch some time with you. I mean, I enjoy tracking your posts, but it's better IRL, or at least over the interwebs of the metaverse, or you know, just this simulcast.

Thank you.